Banks are a place for us to handle our checking, savings, and possibly a loan. Beyond that, for many of us banking is a black hole. Why banks do what they do and how they do it is little understood outside of the banking community.

The more information you have, the better consumer you can be.

Being a Smart Banking Consumer

(Part 8): Electronic Money Movement

This article will address some of the basics of digital banking. This includes a variety of banking basics including online banking, the Automated Clearing House system, and debit cards. Each of these topics relates to the movement of money electronically.

ONLINE BANKING

Online banking allows you to pay your bills without writing a check. Virtually every bank today offers online banking. The setup is relatively easy signing for the service.

When you go to a bank’s website, there will typically be an “Online Banking" section, sometimes called a “portal.” When signing up, the bank will verify your checking and savings accounts and your identification. Once that is done, you will select any name or number— or combination of both— for your online access ID.

The bank will give you a temporary password in order to access its online banking section, Once into the portal, you are required to create your own password. Each bank has a unique set of password length, number, letters, and/or symbols that it will require you to choose as your password.

You can then go on to select a company you want to pay a bill to from your checking account, either on a one-time or ongoing basis. You will need the name and address of the company, plus your account number, in order to pay the bill. You then select the amount and the date of payment. Some bills are paid by check, while others are paid through the Automated Clearing House (ACH) system.

AUTOMATED CLEARING HOUSE (ACH) SYSTEM

The ACH Network is the backbone for the electronic movement of money and data in the United States. The ACH system is organized and set up by an organization called the National Automated Clearing House Association (NACHA). The National Automated Clearing House Association manages the development, administration, and governance of the ACH Network.

Direct Deposit

The ACH Network is used for direct deposit and for paying certain bills. Direct deposit is an option you can choose to receive paychecks from work, or if you receive money from the government or a financial company on a regular basis. Instead of receiving a paper check, the money is deposited directly into your account using the ACH Network. Certain bills that you pay each month will also be paid by ACH. These bills usually involve another financial company, such as a loan to a bank or a credit card payment, in addition to large organizations such as utility companies that receive thousands of payments each month.

ACH Withdrawals

Instead of paying a bill for the same amount each month on online banking, you can have money automatically taken from your account each month. For example, this can be done for a monthly insurance bill or a loan payment. Each company that sets up an automatic withdrawal from your account does so using the ACH network. You must give the company written permission for this to happen. If you want to stop these withdrawals, you must notify the company at least a month in advance.

Unauthorized withdrawals by ACH

If you notice an unauthorized withdrawal from your account, you should notify your bank within 60 days. Once reported, the bank will investigate the transaction to determine if it was unauthorized or if you did authorize it. If you wait longer than this 60-day period to notify your bank, you may have to allow the withdrawal of any unauthorized transactions that occurred. In order to hold you responsible for any unauthorized transactions, your bank or credit union would have to show that the unauthorized transactions would not have occurred if you notified them before the end of the 60-day period. Be sure to notify your bank within 60 days of any unauthorized withdrawals.

DEBIT CARDS

Opening a Debit Card

When you open a checking account, the bank will ask you if you want a debit card. The debit card allows you to use the bank’s ATM machine and to make purchases at any retail store or gas station. A purchase made with a debit card is an ACH transaction that is set up to immediately withdraw the money— usually from your checking account. Unlike using your credit card, the debit card requires a pin as authorization when making purchases. The pin is usually at least a four-digit ID you choose when setting up the debit card with the bank.

Lost or Stolen Debit Card

If you lose your debit card or PIN, or if either of them was stolen, you should notify your bank within two business days of discovering the loss or theft of the card or PIN. If you do this, the bank or credit union can’t hold you responsible for more than the amount of any unauthorized transactions, or $50, whichever is less. If you notify your bank after two business days, you could be responsible for up to $500 in unauthorized transactions.